PEER COMPANIES

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PEER COMPANIES

ET Intelligence Group: The stock of L&T Finance Holdings gained 10% on Monday after the non-banking financial company declared its provisioning journey to be complete by allocating additional funds towards stressed assets. It also reported robust numbers for the June 2018 quarter reaffirming commitment towards improving profitability and asset quality of the business.

Talking to ET, the company’s MD Dinanath Dubhashi said that the provisioning requirement on stressed infrastructure assets is now complete. “We had earlier provided for Rs 1,200 crore towards this. In the June quarter, we adjusted another Rs 1,800 crore thereby taking total provisioning to Rs 3,000 crore against stressed assets of Rs 5,000 crore.”

The company took this measure to align accounting practices with the Indian Accounting Standards (Ind-AS) which stipulates lenders to provide for expected future losses under a methodology called expected credit losses (ECL). This differs from the previous accounting standards (Indian GAAP) which focused on incurred losses. ECL is based on statistical models which incorporate internal and external factors affecting the loan portfolio.

L&T Finance provided for the entire ECL in its infrastructure portfolio at the end of the June quarter.

The company reported robust 71 per cent growth in net profit at Rs 538 crore for the June 2018 quarter aided by double digit growth in interest and fee income and lower credit cost.

It continued to reduce focus on wholesale segment during the quarter in favour of rural and housing finance. The proportion of wholesale loans reduced to 45 per cent from 55 per cent a year ago while that of rural and housing together increased to 46% from 36%.

At Monday’s closing price of Rs 170.8, the stock was traded at a trailing price-book multiple of 2.9. Considering the company’s improving asset quality and increasing focus on fast growing rural and housing portfolios, the stock is expected to stay on investors’ radar.